Last weekend my wife reminded me of the countless night trips we made to Gertrude’s Children Hospital when our children were small.

Our children often used to fall sick at night and often, it would start with a fever. Thank God they have now outgrown that age when children are susceptible to illness.

Like most parents with small children we ensured two things were always at home – a thermometer and some paracetamol syrup.

Everytime we noticed a high fever, we would give paracetamol and drive to hospital. This is because we had learnt two important things about children’s illnesses.

First, fever was a sign of an infection that needed urgent treatment. Second, we knew that paracetamol is a pain reliever and fever reducer but would not cure the disease responsible for pain or fever. We knew without treatment, the situation would only get worse.

Like young children, start up businesses are vulnerable to many illnesses. This is why the mortality rate of start ups is high.

In most cases business hitches are manifested by symptoms such as poor sales, cash flow problems, high staff turnover and so on.

Unfortunately most entrepreneurs spend so much time and energy trying to treat symptoms rather than establish the underlying cause and tackle it head on. The result is always fatal.

For instance if you find your business is in perennial cash flow problems such that you cannot start a new project without external funding or  pay bills on time,  you need to know  that there are underlying problems that must be sorted.

Quick fixes like overdrafts, top up loans or extended credit periods from your suppliers are like giving an ill child paracetamol, which will only relieve pain or lower fever as pathogens continue to multiply in the body.

Perennial cash flow problems in a business may be caused by several things such as undercapitalisation, biting more than you can chew, poor sales or poor financial management.

Poor sales in turn may be caused by poor marketing, poor product development or lack of promotion. Some of these problems cannot be solved by injecting more money into the business.

Incidentally, that is what most business people do and end up in deeper problems.

Some years back when one of my businesses was in financial distress I visited a business advisor who immediately was able to see what was slowly killing us.

We were focused so much on producing more products than we did on promoting and selling the existing ones. At that point we thought more was better.

We hoped we could increase cash by increasing our product range. We were wrong. This is why every business sometimes needs a second eye.

Based on her advice that, of course came at a fee, we shifted our focus from producing more to aggressively marketing what we had and sales went up astronomically.

Our cash flow improved and we were able to do most of the things we had planned to do without borrowing a cent.

The best source of money to run any existing business is revenue generated from selling its products and services. This option must be explored before going afar. It is cheap, most rewarding and sustainable compared to all others.

My personal experience with most small business owners is that they spend more time thinking of external sources of funds rather than exploring opportunities of increasing internal revenue generation or cutting costs by increasing efficiency.

 

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